Ladies and gentlemen, welcome to the Volkswagen AG Investor Analyst and Media Call 9 Months 2024. I am George, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Pietro Zollino. Please go ahead.

Good morning, everyone, and a warm welcome to the 9 months 2024 results of Volkswagen Group. Is, as usual, is a joint call for both media as well as investors and analysts, which is moderated by Rolf Woller, our Head of Treasury and Investor Relations; and myself, Pietro Zollino, I'm heading Corporate Communications here at Volkswagen Group. With us today is Arno Antlitz, CFO and COO of Volkswagen Group. Let me provide a few remarks before we start. By now, you should have received all materials, including the press release, the interim financial report and the presentation, all of which were published this morning. If you do not have them yet, you can find all the documents on our corporate website. In case of any issue, give us a call or drop us an e-mail, and we will send them straight to you. With that, let me now hand over to Rolf for a brief run-through of the next 1.5 hours.

Thank you, Pietro, and a very good morning to everyone on the call also from my side. Thank you very much for joining us today. What's on our agenda? We will have Arno presenting the 9-month financials and then the key developments during the quarter and thereafter providing the full-year outlook for 2024. We will continue then with his presentation in a Q&A session for the investor and analyst community, which will be moderated by myself. And after this session, then we will have a short break, as usual, before we continue with the media Q&A, which will be hosted by Pietro. As a reminder, as always, the safe harbor language and the other cautionary statements on Page 2 of our presentation, which will govern today's presentation. Please read it yourself because I will not read it for you. And with that, I hand over to Arno. Arno, please go ahead.

Yes. Thank you, Rolf, and good morning to all of you. Before we go into the details of the presentation, allow me to briefly comment on the current situation in Brand Group Core. The 9-month results, and particularly the earnings development at Volkswagen Brand, Volkswagen Commercial Vehicles and Technology Components over the last three quarters demonstrate the urgent need for action in a volatile environment characterized by intense competition. This is why we are facing important and painful decisions that we need to make together and to bear together. I'm well aware that the cuts we are facing are tough for all of us and that many employees are worried about their future. However, it is our shared responsibility to act for the future of this company and for generations to come. We've not forgotten how to build great cars, but the costs, specifically in our German operations and factories are far from being competitive. This is where things cannot continue as they are now. In view of the confidentiality of the ongoing talks with our tariff partners, I ask you for understanding that we do not want to comment specifically on plans on measures or speculations in the press. With that, let me continue to the presentation with the highlights of the third quarter. Starting with quite a number of exciting product launches in the third quarter, the new ID.7 GTX is currently the most powerful electric cars from the Volkswagen brand. We have also just marked a new range record of 794 kilometers with one single charging load with the PRO S version. The famous VW Transporter is now in its seventh generation with more space and payload as well as improved towing capacity and economics. The new ID unique e-SUV has been launched the Chinese market, the vehicle, which is tailor-made for the demand of Chinese customers is characterized by a particularly progressive design and a smart human machine interface with a customable 3D Avatar. New Skoda Elroq is a brand first all-electric model in the important compact SUV segment. The model is on sale since early October with an entry price of around €33,000. The Audi A6 e-tron is Audi's first purely electric Sportback & Avant model. Its striking design enables the best aerodynamics in the portfolio, and therefore, greater efficiency. Last, but not least, Porsche has just launched the new 911 Carrera GTS as the first road 911 to be equipped with a particularly lightweight performance hybrid. These exciting new models will add to the product momentum we see currently in our order intake figures. I come to that topic later. We also made important progress in the formation of the planned joint venture with Rivian. In the past month, we received all necessary regulatory approvals and even more importantly, we were able to prove the full technical feasibility of the Rivian architecture and software in a drivable demonstrator vehicle. Both were key milestones on our way to set up the joint venture and finally start working on as a team developing the next-generation SUV software-defined vehicle architecture. The joint venture fits very well into our platform strategy and the road map we have set for software architectures. It enables our brands to launch future electric vehicles on the PPE and SSP platform based on a highly competitive and state-of-the-art electrical architecture and vehicle software and significantly reduce cost per vehicle and this more efficient use of capital. We also hosted the World Premier of Scout last week in Nashville. For us, as the Volkswagen Group, it is more than just another model or a new brand. It's a once-in-a-lifetime opportunity to strengthen our position in North America in the long-term. With Scout, we will be represented in the most important segment of the U.S. market in the future, pickups and rocket SUVs. These two highly profitable off-road segments have been dominated by American manufacturers for decades. The segment previously consisted of combustion engine vehicles and we have neither the brand nor the scale to be able to seriously play in this segment. Now this segment is also gradually turning towards electric, and we have all the ingredients we need to be successful. The electric technology local batteries from PowerCo and last but not least, a great brand with Heritage, namely Scout. We are convinced that the future is electric, but the transition to electric mobility in the U.S. is not as fast as originally assumed. And one example of how we want to shape the transition to e-mobility is the introduction of a range extender for Scout. Scout is a fully electric vehicle per se, but we want to offer a range extender as an option from the beginning on. With that, back to the 9 months results, starting with group deliveries. We delivered 6.5 million vehicles to customers about 3% below the prior year level. Order intake in Western Europe remained robust due to seasonal effects, Q3 order intake at 674,000 units with some 82,000 vehicles below the number achieved in Q2 2024, but 27% up on the prior year number. And it's worth noting that September order intake accelerated again substantially compared to the summer months and compared to the previous year, driven by good customer demand for the attractive new product lineup, which is becoming more and more available in the markets. As per end of September, the order bank in Europe stood at 870,000 units. The 3% decline in deliveries was in particular driven by lower volumes in China, where volumes were 10% lower year-over-year in the first 9 months and 15% lower in the third quarter. The overall growing Chinese market is still characterized by significantly declining ICE volumes and a shift towards BEVs and specifically PHEVs. Deliveries in Europe were almost stable in the first 9 months, but weakened in Q3 with a decline of about 7%, not least to the lower BEV volumes. In the North American and South American market, the positive trend seen in the first half year continued in the third quarter. Our team in the North America delivered a very solid 7% growth with Volkswagen brand growing even by 24% in the region, a significant first step towards a more robust global footprint and an excellent result of our team there. Group deliveries in South America grew by 15% year-over-year. Demand for battery electric vehicles in Europe and North America continued to be muted as a result of BEV deliveries were 5% lower year-on-year. BEV's deliveries in Europe and U.S. were down by 14% and 26%, respectively. This could not be compensated by double-digit growth of 27% in China. In total, we delivered 507,000 BEVs to customers worldwide in the first 9 months, corresponding to a share of about 8% of group deliveries. During the year, the BEV share improved sequentially to a level of around 9% in Q3. BEV order intake in Western Europe showed an encouraging trend recently, more than doubling compared to year-end 2023, supported by recent new model launches. Let me now give you a summary of the Q3 financials. Third quarter was expected to be the weakest quarter of the year 2024 in an overall challenging environment, not only for seasonal reasons and corresponding lower volumes, but in particular, due to the flat restructuring expenses booked at Audi related to the potential alternative use or closure of the Brussels plant. In addition, supply shortages were a headwind at Porsche and [indiscernible], whereas availability of six and eight cylinders engines at Audi was normalizing in Q3. With this general remarks, let's move on to the financials and the operating performance of the Volkswagen Group. Vehicle sales came in at 6.5 million units in the first 9 months, down year-on-year at minus 4%. Excluding our joint venture operations in China, vehicle sales were down by 1% to 4.6 million vehicles year-to-date. The corresponding slight decline of 1% in automotive sales revenues could be overcompensated by improved sales revenue in the Financial Service business. And as a result, group sales revenue improved slightly year-over-year to €237.3 billion. This is up 1%. Operating result came in at €12.9 billion, corresponding to a margin of 5.4%, 1 percentage points below the prior year period. Profit before tax amounted to €12.5 billion in the first 9 months of 2024, some 29% below prior year period. In addition to the lower operating result, this was due to a lower financial result. Profit after tax declined by 31% to €8.9 billion, and as a result, earnings per share were down by 33% to €15.2. All these figures are reported and are not adjusted for any nonoperating effects. Third quarter results were impacted by additional €1.2 billion restructuring charges largely related to ongoing information and consulting process with regards to the Audi Brussels side. This brings the total impact from various nonoperating items accounted for in the first 9 months to €2.5 billion. The remaining €1.3 billion had already been booked in the first half. Net of these nonoperating items, underlying operating result in the first 9 months stood at €15.4 billion and a margin of 6.5%. The underlying operating result in the third quarter stand-alone amounted to €4 billion and the return of 5.2%. But to be very clear, a reported margin of 5.4% after 9 months is by far not a satisfactory level and clearly below our ambition and potential giving the product substance and the global scale of our group. We must and we will continue to intensify our efforts across all brand groups and business divisions to bring costs down, improve our competitiveness and our financial performance going forward. Net cash flow in the Automotive division totaled €3.3 billion in the first 9 months, about €1.6 billion below prior year level. This was mainly due to the lower gross cash flow, which was driven by the lower operating result as well as a buildup of working capital of about €2 billion and higher investments. Now working capital, higher inventories in the magnitude of €7 billion, were partially offset in particular by increased provisions and higher payables. In the third quarter, standalone net cash flow came in at solid €3.4 billion, which brings me to our automotive net liquidity, which recorded a corresponding improvement of €3.1 billion compared to end of June 2024. Compared to the year-end 2023, it declined by about €6 billion. This was mainly attributable to the dividend payments as well as the redemption of a hybrid bond, which has already been booked in the second quarter of the year. Overall, at €33.4 billion, net liquidity continues to stay on solid level. Coming to the divisional performance. Passenger cars recorded an operating result of €7.3 billion, about a third below the prior year period. The margin amounted to 4.7%, 1.8 percentage points below the prior year level. Commercial vehicles continued their convincing performance trend results advanced to €3.1 billion, and return on sales stood at a strong 9.1%. The Financial Services division recorded an operating result of €2.2 billion corresponding to a decline of 27% year-over-year. Let us look at the drivers behind the operating result development in the Passenger car segment. Volume price/mix contributed a negative €0.7 billion. As already mentioned, vehicle sales, including -- excluding China JVs were 1% lower. The volume other effect on the operating result was positive despite the slightly lower vehicle sales, excluding the China JVs and this was mainly due to an improved spare part business. Mix over 9 months was affected by a weaker model and brand mix with lower sales at Porsche and Audi. It was even neutral in the third quarter after it had turned negative in the second quarter, pricing nearly stabilized in the third quarter, benefiting from last year's price increases, but offsetted by higher temporary sales promotions, specifically for battery electric vehicles. Product costs were a minor headwind year-over-year, and fixed costs and other costs increased considerably as a result of higher R&D costs, increased depreciation and amortization as well as a continued inflationary trends including higher wages. This bucket also includes the restructuring provisions in the magnitude of €2.2 billion. Our overhead costs in our automotive division continued to show a clearly disappointing trend, both in absolute and relative terms, overhead costs increased considerably in the period under review. This was mainly driven by the carryover effect of wage increase from 2023 and the lower sales revenue. And as a result, overhead cost ratio stood at 17.4 percentage points in the first 9 months of this year, 170 basis points above the prior year level. Given an intensifying competitive environment as well as the ongoing transformation of the industry towards better electric mobility, this is clearly a call for action. We increased challenges in the market environment. We have to step up our efforts to improve our competitive position and cost structures, in particular, in our German operations. And this is -- moving on to automotive investments into R&D and CapEx. R&D costs increased by €1 billion in the first 9 months as a result of the accelerated transformation of the Volkswagen Group's brands towards electrification and digitalization as well as the ramp-up of our PPE and PPC platform at Audi and Porsche. CapEx continues to be at high levels due to significant upfront investments in new models in battery and software as well as the execution of our regional strategies. And relative to automotive sales revenue, the investment ratio stood at 13.6%, up on the prior year level due to higher investments as well as lower automotive sales revenue in the first 9 months. We continue to work towards reducing investments in R&D and CapEx to €165 billion in the next planning round 2025 to 2029, key to achieving this is a consequent utilization of synergies across the groups and within the Brand Groups, of course, more efficient R&D processes and structures, gradually lower investments in ICE, the expected effect from the planned joint venture with Rivian and adjusting our battery capacity buildup to the market needs. With that, let's move on to the performance of our Brand Groups platforms and Financial Services business. Brand Group Core recorded stable sales revenues year-on-year. Year-over-year, supported by increased list prices and positive mix but held back by higher fixed cost and higher tactical specifically for battery electric vehicles. The operating result declined by about 10% to €4.5 billion, corresponding to a margin of 4.4%, 50 basis points below the prior year period. If adjusted for restructuring expenses, however, the underlying operating margin stood at 5.2%. Brand Group Progressive recorded sales revenue significantly below last year's level, mainly due to lower vehicle sales and constraints of the 6 V-8 engines, in particular, in the first half of the year. Operating result came in at €2.1 billion, corresponding to a margin at 4.5%. As mentioned before, earnings were particularly burdened by the restructuring provisions of €1.2 billion in the third quarter related to the potential alternative use or closure of our Brussels site. We expect the positive underlying earnings trend to continue in Q4 with Brand Group Progressive, aiming for a double-digit margin in Q2. Brand Group Sport Luxury recorded an operating margin of 14.6% in its automotive business, corresponding to a decline of 4.3 percentage points compared to the prior year figure. This was mainly due to lower sales volume, in particular, in the Chinese market, higher ramp-up costs due to a record number of new model launches as well as headwinds from supply shortages in -- overall, Q3 should have marked a low [indiscernible] Porsche plans to reaccelerate into Q4. Let us have a more detailed look at the Brand Group Core. Two developments stand out here. First quarter delivered a very consistent performance throughout the year and achieved a solid 8.3% return on sales in the first 9 months in a challenging environment. This once again underlines that efficient cost structures, combined with strong product substance, can generate highly competitive margins. All other brands and businesses of the Brand Group recorded a sequential erosion of the operating margin in the course of the first 9 months, once again highlighting the urgent need to take decisive action to reduce costs and enhance productivity in particular, in the German operations at Volkswagen Brand, Volkswagen Commercial Vehicles and technology components, as mentioned earlier. CARIAD continued to roll out software, which resulted in an increase of sales revenue of about 20% year-on-year. Operating result continued to be significantly negative at minus €2.1 billion. Reported net cash flow stood at a negative €1.3 billion as CARIAD benefited like last year from a €1.1 billion intra-group income tax refund, the underlying cash out total to minus €2.4 billion closer to the operating loss. Our battery business continues to ramp up the organization and advances in the construction of production capacity, in particular at the [indiscernible] side leading to an operating loss and cash out of about €400 million year-to-date. TRATON continued its positive earnings trajectory and delivered another strong performance in the third quarter after already very solid results in the first half of the year. Unit sales normalized in a weaker market environment, specifically in Europe and decreased by 2% year-to-date. Operating margin came in at a strong 9.1%, up 110 basis points versus the prior year period, driven by increased ARPUs and improved cost structures. In the period under review, TRATON delivered a net cash flow of €1.1 billion and was able to reduce indebtedness in its industrial business further. Volkswagen Group Mobility saw a slight increase in overall contract volume. The credit loss ratio was stable on an overall solid level. Operating results in the Financial Services division in the first 9 months, 2024, as expected, fell by about a quarter to €2.2 billion. This reflects the continued normalization of used car prices, a more difficult business environment in markets outside Europe and higher risk costs. Moving on to our performance of our China JVs. From a volume point of view, sales decreased by 11.5% to 1.9 million vehicles in the first 9 months of 2024. We saw strong growth in sales of battery electric vehicles, which could not be compensated for a significant decline in our ICE business, as the market continues to shift to NEVs. The proportion operative result of our Chinese JVs amounted to €1.2 billion after 9 months in 2024, down 37% on the prior year number. Lower volumes in a highly intense competitive environment, the margin dilutive effects from higher BEV sales and costs related to the realignment of our business and the VCTC ramp-up were main reasons for this development. Overall, results year-to-date are in line with our expectations, and we expect to end the year at the proportionate operating result of around €1.6 billion. Finally, moving on to the full-year outlook for 2024, which we had adjusted on the 27th of September. We expect sales revenue to around €320 billion, operating profit at around €80 billion and automotive investment ratio between 30.5% and 40.5% and automotive net cash flow of around €2 billion. Net liquidity is expected between €36 billion and €37 billion. The outlook reflects a total of minus €2.6 billion in nonrecurring earnings effects. However, it does not include the potential additional burden from a conclusion of the current ongoing negotiations in Germany. That said, we continue to expect a solid fourth quarter this year. In order to deliver on that expectation, we built on a step up of sales and earnings momentum supported by the launch of the new models. We are building on a solid order bank in Western Europe with visibility well into the first quarter of 2025. At the same time, we factor in that markets will remain highly competitive, and we continue to push ahead with the execution of our performance programs and intense cost work across all brands and divisions as the basis for the successful transformation of the Volkswagen Group going forward. With that, I hand it back to Rolf, and thank you for listening. A - Rolf Woller: Thank you, Arno. And we will now proceed to the live Q&A session. [Operator Instructions] And I can already see first questions coming in. We would start the Q&A with Jose Asumendi from JPMorgan. Jose, please unmute and go ahead.

Thank you. Good morning, Arno. A Few questions, please. The first one, I mean, without going into the different restructuring actions you're looking to take. I would love to understand a little bit better, where do you see the biggest cost competitive interest to your peers? And what kind of margin uplift are you looking to achieve when executing these measures, specifically looking at the Volkswagen brand? And second question, we get this question all the time as we're seeing all these headlines on potential restructuring and potential plant shutdowns, would this impact the ability to pay a dividend in 2025 if these measures will be taken in any shape or form? Thank you. I'll leave it there.

Yes, Jose. Hello from my side and thank you for your questions. I mean the margin uplift is clear. We always communicated that the target for Brand Group for Volkswagen brand is 6.5% in 2026. And that would sequentially lead to 8% margin of Brand Group Core in this year. And we originally communicated an improvement program of €10 billion. But since the circumstances in the industry and the environment deteriorated, we had to step up these efforts. So -- and we've made it very clear from the early beginning on that the target is not delivering on the €10 billion, but the target is really to achieve a margin that gives basically or that leads to a Brand Group Core and specifically Brand Volkswagen that is highly competitive going forward and is able to generate the funds to invest into the future products. So looking into the competitive situation and where we see most of the uplift. I mean, we described the program earlier. It has all elements. We work on the revenue side on the margin side, but specifically, of course, on the cost side, and specifically on indirect area and productivity in the plants and also labor-related costs. And so basically, with the mentioned topics, I think that, yes, the biggest disadvantage versus competition is from my side, the fixed cost side, the overhead cost side, and specifically, as mentioned several times productivity and costs in the German operations. And this is where we focus on, but that doesn't mean that we don't focus on other topics as well. We focus on material cost improvements and we focus on other improvements, but these are from my point of view, the things we really have to focus on. And your second question, dividend. I mean our payout ratio is set -- our strategic payout ratio is set that we want to have a payout ratio of at least 30% as parts of our dividend policy. Of course, as you saw, the current situation is impacting also our financial result and operating result and in subsequent our earnings per share. Our earnings per share declined currently by 33% to €15.2 per share. And we cannot rule out additional burdens from restructuring in the fourth quarter due to the ongoing discussions, but it will then, of course, help significant step-ups in profitability going forward. It's thus reasonable to assume that the dividend for 2024 will be below the €9.6 per preferred share of 2024, but let me restate it. Our dividend policy of at least 30% of payout ratio is still valid.

Thank you.

Thank you, Jose. And we continue with Patrick Hummel from UBS. Patrick?

Yes. Thank you, Rolf. Good morning. I have also two questions. My first one is regarding the even tougher stance that you're obviously taking here in restructuring the German business. And I don't expect you to comment in detail and understand the nature of the negotiations. But a few weeks, we talked about up to two plants that could be subject to closure. Now we're talking about a list that goes way beyond that also in terms of wage reductions, et cetera. So I'm just wondering, has there been anything happening in the last say a month or two, that has driven that even tougher stance on restructuring? And I wonder that's a big part of that question, is the free cash flow a limiting factor to how you go about restructuring? Because it sounds like if you're going for very comprehensive measures, this could trigger one-time effects that would basically eliminate the entire free cash flow for a year or two. I'm just wondering if that plays a role? And if you allow me a second one, is there anything new in terms of your thinking on this CO2 front, because that's obviously a significant earnings risk for next year. There is limited action for now, at least from the European Commission as far as the debate about moving or pushing back the targets is concerned. So how does that CO2 complex flow into your thinking about the restructuring needs and thoughts for next year? Thank you.

Yes. Patrick, thanks for your question. I mean, as I said earlier, our target was 6.5% for brand Volkswagen in 2026. And of course, with the deterioration of the market environment over the last, I would say quarters, it became clear that we had to step up our efforts, but nevertheless, the principle of the need for a restructuring program at Brand Volkswagen on the fields. I just mentioned, fixed cost, productivity, overhead cost that was very clear from early on. So the situation has not fundamentally changed, and there was not a single impact or incident that drove that change. It's just that we said we want to and have to deliver on the 6.5% in order to make the group and the brand future proof, and we had to step up our ambition. In terms of plant closures, the situation we see, and I described that earlier on in several occasions, is not new. The market -- the total market in Europe was, as we counted 60 million cars and after -- before COVID. And after COVID, we see 40 million cars, and we don't expect that to significantly change over the next years to come. So this is like 2 million cars missing. We have 25% market share, which leads to the overcapacity we have of about 500,000, and this has also not changed. And we have to tackle this topic as well. In terms of free cash flow. I would put it like the volume. Our focus now in the discussion with our partners from the unions and the labor representatives should really be on fund measures to make sure that Volkswagen has a good future. The brand Volkswagen is able to achieve the 6.5% and is also able to earn the financials and have the strength in the earnings and to significantly invest into future products. And we should take the measures that are necessary in this situation, and from my point of view, we should not limit ourselves by potential consequence on the free cash flow. And we have the possibility for doing so, because we have a very solid net liquidity. And this very solid net liquidity puts us in a situation that we are able to do the decisions necessary to lead Volkswagen into a good future. And thirdly, CO2. Yes, 2025 will be a challenging year. This is clear. We want to achieve our compliance by ourselves, while protecting our profitability. This is clearly a trade-off. You're very well aware of that. What makes me confident is the very positive order intake in Q3. So basically, if you compare our order bank in the BEVs, it almost doubled versus end of last year and very, very positive and strong models to come. We have a good order intake on the ID.7 Tourer. Audi is bringing great models, Porsche is bringing additional models. So that gives me -- gives us confidence for significantly better CO2 position in 2025. Will it be enough at the end of the day? We have to look and see because, as we discussed, we also want to protect our margins. There is also might be a potential credit pooling chance for us. We will have to look at that. But this is really too early. For the beginning, we sit on a really good product momentum. I talked about the Skoda Elroq with something like 33,000, a great car coming. Unfortunately, the ID.2, which is then really the game changer in our business, come 2026, but it doesn't help to model on that. The significant step-up really will come with the ID.2 family, a really great design car for €25,000, very competitive cost structure, built in Spain, LFP battery entry from our own PowerCo. So that will be really in terms of volume and CO2, the game changer from 2026 onwards, and 2025, we have to look how the year goes.

Thank you, Arno. And good luck with the negotiations.

Thanks, Patrick. And maybe what we can add, yes, the -- I mean, we have also seen very good reports by -- not only by you, but also by others analyzing the CO2 situation coming up with in part quite drastical headwinds for 2025. And as said during the road show activities as well, we don't think actually that the worst case scenarios we are calculating up to €4 billion headwind that this is the -- reflects the current situation should be much, much lower.

I mean what I forgot to mention, but we could also mention is, we have an extremely good order intake on PHEVs, which are extremely competitive in terms of range, specifically [indiscernible] and PHEV. And so as you're aware, this helps also in the CO2 balance for 2025.

Thanks again.

Thanks, Patrick. We continue with from Tim Rokossa from Deutsche Bank. Tim, please go ahead.

Yes, thank you very much Arno and Rolf. I would have two questions as well, please. The first one is on the very strong order intake, while simultaneously having the surprisingly stable pricing. Just to clarify this, is that the model initiatives that we are starting to see bearing fruits or have you done anything else to stabilize pricing and increase order intake? And if that is indeed the case, where do we stand on the rollout? And should we expect this both to develop favorable also in Q4 from what you can hardly judge? And secondly, Arno and evergreen in our discussions, you're coming close to your planning round. Let's talk about investment needs. Last time we spoke, you said that there's room to the downside in spending given Rivian and other developments. Do you still see the investment plan coming down? If so, to what? And are we now at the peak of the investment spending? Is that ratio coming down from you? Thank you.

Yes, Tim, thanks for mentioning. Now we are very pleased with the price bucket, price versus incentives in the quarter Q3, which really stabilized. And yes, there is a kind of a positive momentum from the new models, which are, of course, young and fresh. And we will continue to see a positive momentum from the new models there. On the other hand, we have to step up significantly the BEV side. And as you know, the BEVs are currently margin dilutive. The first really basically BEV with margin currently will be the Q2 that ID.2. And the BEVs are not only margin dilutive, currently the BEV, as you see in our pricing, carry higher incentives, obviously. So in principle, we expect a more stable situation on pricing versus incentives and technicals, but the BEV ramp-up will deteriorate in the coming quarters, obviously, once we go into 2025. Yes, but as I said before, be rest assured, we want to make sound and we will make some compromises between pricing and volume. Yes, on the famous it used to be 180, then 170, now 165. Everything we've said before is still valid. From today's perspective, we expect R&D CapEx combined to peak in 2024 and not only relatively, but also in absolute terms. And yes, specifically, the joint venture with Rivian will give us a potential to improve specifically on the software expenditure. So nothing new on that. If there might be necessary of stepping up of investments, R&D CapEx for a slightly more capacity on PHEVs or HEVs, we will then have to compensate that on the expenditures on the BEV side. So they won't come on top.

Very clear. Thank you.

Thank you, Tim. Then we continue with Horst Schneider from Bank of America. Please go ahead.

Yes. Thank you. Hope you can hear me? I have got two to three questions. First one, maybe more plain vanilla ones on Q3. Since you pointed out your price mix impacts, which were both just €100 million each in Q3, was the kind of sequential improvement in terms of price mix? And if that was the case, why? And on product mix, we still can't see any positive raw material price impact, so what's driving here the product mix line? And is there a chance that this gets any better in Q4 or maybe this just happens in 2025? On the restructuring, I know you cannot say a lot on that, because the second negotiation round starts at 10 o'clock today. So therefore, you need to be tight lipped, but I think what we seeing now from a capital market perspective is that you run into severe strike situations in December. And of course, also you cannot call it out today, but maybe you can tell us what is the daily usual production volume at Volkswagen AG for the mass market business in Germany? And what would it mean if the production would stop by one day in terms of earnings, just a ballpark range, that would be great? And last, but not least, on restructuring on the government, I realize that the unions say always not just Volkswagen needs to do something also the government needs to do something. Is there anything that the government can do that you basically step back a little bit from your restructuring ambitions? Thank you.

Yes, asked several questions on the price mix side, I can only reiterate that we had really a stable third quarter. And on the mix side, specifically, we were restricted by Audi this Q6 and create engines, which we basically got a significant release in Q3 and also Porsche had a significant changeover. So and with going forward and the recovery of Audi and the recovery of volumes at Porsche with -- moving on to the new models, you should also expect a significant positive product mix going forward. In terms of pricing, I just explained the mechanism. We see a very good pricing on the ICE. But yes, as you can see in the market, not only with us, but also with our competitors, that we see a dilutive effect of the BEV ramp up, specifically in Q4 and then going into 2025, which is really too early to tell how the situation in 2025 will be. But because you're aware every competitor wants to achieve the two months targets in this year. Yes, in terms of restructuring, I really don't want to speculate on strikes and on potential calculations. It depends on -- of course, on which factory, it depends on is it car and component business. Don't forget, we have also a component business in Germany. But only I can say we need to make sure that the compromise we find will be significant. So that Volkswagen can achieve the 6.5% margin and can go -- move into a profitable and successful future and will be able to invest into future projects from for themselves and not dependent on the group. And I'm confident that we reach agreements that -- so that we will achieve this target. But of course, I cannot rule out strike. This is clear. And -- but sorry for not being more specific, Horst, but I don't really want to do more on a [indiscernible].

But just your daily production in Germany?

In December, normally a little bit lower, yes, because of the -- as you know, there is holidays also coming in December. But as per your understanding, Horst, that we are not going into details here.

I mean, Horst, if you take some factories, you know the output of like [indiscernible] Volkswagen and you know the number of working days, so you can have a rough indication 500,000 units, so we got 250,000 units over the year. So I think you can do a very rough math on that, if you calculate that down by months, weeks and then days. But really I don't want to give a number and I don't want to speculate on that.

Yes, sure. No problem.

Yes, in terms of governance, what I -- my position is we have to look into ourselves and do our homework to what we can do. And we have to focus on what we have in our hands. And we did that, and I'm confident that we can deliver on that. Of course, there is a discussion of CO2 regulation, what about 2025, but all I can say in a more general topic, we adhered to the ramp-up of electrification. We invested accordingly. We have convinced that the future will be electric. And for that, we need, of course, stable requirements, a stable situation and stable decisions, but also for the current discussion on productivity and competitiveness, we really look into ourselves and discuss the measures we can do as a company.

All right. Thank you. Good luck.

Thank you. We can definitely need the good luck. And we continue with the next question which comes from Henning Cosman from Barclays. Henning, please go ahead.

Yes, thanks for taking the question. The first one maybe on this encouraging statements on the Brand Group progressive double-digit in the fourth quarter, no deep context warnings from Mercedes and BMW. So that looks really good. Is that a sustainable level? Or is there anything in there that would make you think you can't extend that into 2025? First question? And then the second question on Scout. Good to hear that you had the technical feasibility done and also the regulatory approvals. Is there anything more that you can say around Scout and Rivian on the potential of perhaps -- the vehicles obviously fairly similar would appear to go head-to-head in terms of competition in the market, because you have via the investment, the equity stake already. Could you just share about how [Technical Difficulty] there perhaps a further integration [Technical Difficulty]? Thank you.

Yes, Henning. Thank you on your comment on Audi and also on Brand Group Core. Let's not forget there's also two other great brands or three other great brands, it's Bentley, Lamborghini, which really work closely together and already draw a lot of synergies. We always said, Audi has a very strong product momentum. Now a lot of new cars are coming Q6 etron and then we have the A5 -- A7, Q5 and Q7. So there's a lot of momentum there. I don't want to do too much of a detailed discussion, because when is the conference call of Audi?

I think tomorrow or the day after tomorrow.

So even tomorrow, so I don't want to give you too much detail, but don't -- also not forget that with the ramp-up of BEVs also in our premium brands, currently, the BEVs are margin dilutive, and so that will have an effect. But nevertheless, we are really confident that the product momentum Audi will show over the next 24 months will significantly benefit Audi. But really for more detailed discussion, I refer to my colleagues, which gives you -- is happy to give you more details tomorrow. Yes, about Scout, I must be careful that I'm not too enthusiastic about this project, because I still also not like the CFO, but also in my role of looking to the North American market. The key elements I gave you already it's potentially outside in one of the most profitable and encouraging segments worldwide with stable returns. It's turning electric, and we have the ingredients we need for that. We have the battery technology that will get it from Ontario, the batteries from Canada from PowerCo with very competitive prices. We have an electrical component. We do -- although it's a new brand and a new products, we try to get a lot of synergies within the group one synergies, for example, the electrical components. It will share it with the Audi Q8 etron and it's -- we call it LK4. So it will be electrical components from a group chat with Audi. And although it's not 100% decided on already, it's also a possibility that the electrical architecture, we currently develop together with Rivian in our JV, of course, it's clearly an option that this -- one of the early users of this electrical architecture will be Scout. So this is another synergy. In the market, I spend a lot of amount last week on this great event in Nashville, and I talk to the teams and I talk to the marketing people, so they did a lot of like typically segmentation and all these kind of things. And Scout and Rivian are really in different segments in terms of pricing, in terms of miles, in terms of customers. So I'm not afraid that there will be too much competition. And -- but nevertheless, Scout is a stand-alone brand, and they will find their customer in the heart of this really American segment. And last, but not least, and then I'm done, we had a very good response on the range extender. There was a little bit of skepticism about our volumes. Going forward, how fast is this the segment turning electric. But with the -- including of the range extender and but we got the technical feasibility now, there's a lot much more, I would say, confidence in the ramp-up, because specifically in the early years, we expect this range extender to significantly add to the demand and stabilize the volumes.

Thank you.

Thanks, Henning. And I have to apologize the Audi conference call is on November 5th. I should have known this. Yes, thanks, Albert [ph] actually for texting me. So they need a little bit more time in order to put together the very encouraging outlook.

Yes. But then also more tied to a very convincing answer.

Very good. So we continue with Tom Narayan from RBC. Tom, please go ahead.

Yes, thanks for taking the questions. I have two. One is the follow-up on Henning's on Scout and Rivian. I understand right now the two very gorgeous vehicles, by the way, Scout, don't price exactly where Rivian with their R1S and R2 -- sorry, R1S and RT. The -- I guess the thinking is that when Rivian does come out with their R2 and R3, that starts to compete head-on with Scout. So is the strategy going forward to be keeping both complementary, where you're -- where the two are not competing on price and demographic? That's the first question. The second one is you've made a comment, Arno, I think earlier about pre-pandemic, Europe was doing 16 million, now it's 14 million. I guess what would you say is driving this? Is it just a pricing issue? Is it because of BEVs? And why would this structurally continue? We saw one of your German peers last week reported down 10% revenue per unit ex China, would suggest price mix came down significantly in Europe. So why wouldn't pricing come down and that then lead to volumes returning maybe not back to 16 million, but at least somewhat closer? Thanks.

Yes, Tom. Tom, one main thing very clear. Scout is a group brand. It's newly founded, it's 100% group brand, and we focus really -- with Scout, we focus on the segments and all competitors -- not all competitors in terms of focus, but we are aware of all the competitors and Scout is doing the positioning and the pricing really for themselves. The joint venture with Rivian is really focused on software. So -- and we don't discuss and see Rivian specifically from a product side and where Rivian is positioned. We see the whole market and all the competitors. And this is what Scout takes into account and the Scout team takes into account when they do the pricing, whether it's the segmentation, when they do the design. And I said before, Rivian is focused -- our joint venture Rivian is really focused on creating the next generation electrical architecture, state-of-the-art architecture and future-proof architecture in the JV. So we shouldn't mix up these two discussions. And yes, if I understand you right, you asked me and us, why do we expect the €40 million -- 40 million cars continued in Europe? I mean if you look at the -- all the trends in terms of growth, in terms of household income, and we don't expect the market to grow significantly in Europe. Next year, we expect a 1% to 2% increase. And so yes, might it be like 14.1, 14.2, 14.5, it might grow slightly. But from our perspective, we won't see levels of pre-COVID, COVID before. And so there are inflation trends. There are macroeconomic factors, customers and people have to spend more for energy and other topics. So this is our -- yes, our forecast going forward. And I think it's safe and robust to not base our assumptions on a growing market, and then that will eventually not come. So it's -- I think it's absolutely the best assumption we can take in the company. Rolf, can you -- I mean, you are doing a lot of like this economic refresh, can you -- want to add on that?

Tom, you are right. I mean, price is a decisive factor. When we look pre-COVID or since the pandemic, obviously, prices have risen in average by more than 20% car prices. On the other hand side, you have trends like home office, alternative mobility solutions. So therefore, the structural under demand, whether it will persist now at 14 million remains to be seen. But it's not only us who are seeing this trend, it's also third-party who clearly sees that at least for the foreseeable future, there is no recovery above this 14 million level. And well, forecast can be wrong -- but for the time being and looking at the arguments, it looks reasonable to assume that the demand stays at that 14 million level for the foreseeable future.

Thank you. And we continue with Stephen Reitman from Bernstein. Stephen, please go ahead.

Yes, good morning everybody. Two questions, please. I'm looking at the old deck and looking at Slide 5, looking at the planned JV with Rivian and comparing it to Slide 23 with the CARIAD results. And obviously, congratulations on proven technical feasibility of the concept already and done in very quick time, so that's very good. What about telling you about how fast Rivian moves and how far you can move with Rivian compared to the relative slow speed of CARIAD and the fact that CARIAD looks like it lost another €900 million in the third quarter. And how do you see CARIAD's -- the vector of CARIAD's results going forward on that, please? And secondly, on BEV sales in Germany, you have enough promotion at the end of the year, which basically means that you're selling the ID.3 for just €29,800 in Germany. Do you think that's actually going to be the sort of pricing levels you're going to have to maintain through 2025 to make your CO2 emissions targets? And what does that say about the profitability at that kind of levels? Thank you very much.

Yes, Stephen, thanks for your question. Very valued question in terms of CARIAD, and we already communicated that. We will basically, in the JV with Rivian, we will develop the next generation software stack. We call it 2.0. But don't forget the CARIAD is currently deeply involved in the ramp-up and improvement of the 1.2. This is a software -- of the PPE platform for Audi and Porsche, which will be also very competitive in front of the customer with a lot of features and also with the 1.1 software for all our MABs and also, there will be other functions that will be responsible, for example, ADAS, driving assistant functions. So the CARIAD will play an important role going forward. And in terms of business case, of course, we expect CARIAD to significantly improve in terms of EBITDA and cash flow. Why? First and foremost, it's depending on the business model. As you know, CARIAD had basically all the upfront investment on their books and then the sales basically are license fees that are paid by the brand car by car. So since the 1.2 -- the first 1.2 cars are ramping up just now with the PPE -- on the PPE platform, Q6 e-tron A6. So eventually, the sales side, basically on CARIAD is significantly improved going format starting with next year and also with the ramp-up of more MAB cars that the license income will significantly improve. And at the same time, you rightly expect that the expenditures should go down since we have the improvement of the 1.2 and the 1.1 software in our books and ADAS, but the expenditures for the 2.0 will basically move through the joint venture. So you will see a significant increase in profitability or an improvement in the current profitability situation going forward for CARIAD. And the current, I would say increase in losses in CARIAD has also to do that in anticipation of the software situation going forward, the capitalization rate of the CARIAD software went down in the third quarter. So this was basically driving the profitability situation incurred in Q3. In terms of -- and which was also basically a consequence of the software strategy going forward. And in terms of BEV sales, I mean, you are aware, we had the repositioning of our ID.3 models. But you're also -- and new models are coming, for example, like the Elroq with basically €33,000 in Germany. But you're also obviously aware that, for example, ID.4 and ID.7 and ID and other models and the premium models are very stable in pricing. So it's more like, I would say, a contribution to the BEV ramp-up in the fourth quarter and then sequentially into 2025. And as I said before, the ID.2 will be then really the game changer with €25,000 and a very attractive model in the market coming only 2026. So the strategy is like the ID.3 should somehow bridge the time between now and until, for example, Skoda Elroq and ID.2 is coming. And I wouldn't look on the profitability on the specific ID.3 model that it's repositioned, but rather on the greater profitability of the ID family and our electric cars. And in that, I would say, greater view the repositioning of the ID.3 plays a major -- minor role in terms of margins.

Thank you, Stephen. And we are moving on to the next question, which comes from Mike Tyndall from HSBC.

Good morning guys. Thanks for taking my question. Two questions, if I can. Just one, Arno, you focused quite a lot on the 6.5%. And if I'm not wrong, when you first announced the plan, you needed around about €10 billion of savings to get to that. Is that €10 billion number still a valid number or has the world changed and actually you need more now to get to the 6.5%? And then just a follow-up on the dividend, and I don't know how much you can help me here. But given the ongoing negotiations, how do the optics of paying the capital side versus the worker side influence that payout or is it a hard greater than 30% and what's going on in the rest of the business is separate to that particular calculation? Thanks.

Yes. No, thanks for the question. I think I mentioned earlier already, originally, we -- let's put it the other way, the target is clear. We need to achieve the 6.5% in 2026. So we originally started with €10 billion. And so what happened was like some of the €10 billion had like negative -- we saw negative effects. For example, we had some assumptions on pricing and on positive effects on the pricing side. So that didn't materialize due to higher -- much intensified competition. And so we had to I would say, step up the €10 billion. So the €10 billion are now slightly higher. We agreed that we don't really want to give a specific number on that. But yes, the €10 billion are not significant, but they are higher from today's perspective because we had to factor in the negative effect, the headwinds specifically from the markets, as you see in how the competitive environment is intensifying. This was specifically due since the situation. Look, we came from a chip crisis, and they were basically -- from my perspective, there were two phases. First and foremost, in the past due to the shortage of chips, nobody could build and deliver as much cars as there was demand. And so there were like the first step when everybody could build as much cars as everybody needs at every competitor needs, but there was still a high order bank. And with the ramp down of the order bank not only within Volkswagen, but in the whole industry, the competition intensified significantly, and we had to compensate for that in addition in order to restate that in order to achieve the 6.5%. So the €10 billion were gross, but the real target is the 6.5%.

And on the dividend?

Dividend, we had already answered that before, but please repeat the question, I missed it as well.

I'm just -- I know that the calculation is 30% or greater, but I'm wondering about the optics of that, given what's going on. I know you probably will struggle to answer this, but just how difficult will it be to pay capital when you're in the midst of restructuring?

Yes. But I mean, I tried to give the answer before on that. You see the earnings per share going down. So you shouldn't expect the same dividend we paid last year. Of course, there might be even more restructuring, which puts more pressure on the earnings per share as the mathematics works in the P&L. But on the other hand, I also said our dividend policy stands at payout ratio of 30% and this is what I can say currently.

Okay, thank you.

Thank you, Mike. So we are coming closer to the finish line, but there is still three to go. We continue with Daniel Schwarz from Stifel. Daniel?

Yes, thank you for taking my question. I had one more technical on the restructuring. Assuming if you had an agreement with unions to cut wages by X percent, do single employees need to agree on that, assuming they have individual contracts? Or can Unions negotiate this and the outcome simply apply to everyone within the collective agreement and outside the collective agreement? And then on China, the proportional operating profit was €1.2 billion in 9 months. That's down 37%. The dividend you received is €1.7 billion, actually even slightly up year-over-year. Could you explain why and how the JVs are paying that much of dividends? And the last just technical question. Why is the net cash position expected to increase in Q4, while the free cash flow guidance is negative for Q4? Thank you.

Daniel, for your first question, I must admit I'm not an expert. Yes, we will find out or give you answer later on, but I can't answer the technicalities of how that really technically works. So I cannot comment on that, sorry for that. And China, I mean, look, the €1.6 billion we expect this year and the dividends paid is in the magnitude of that. The €1.6 billion this year will be relevant for the dividends paid next year. So the Chinese are currently paying exactly slightly higher dividend because that's basically related to the result we earned last year and on exhibit, we just distributed now. Last year, we had a €2.6 billion proportionate operative result and the dividends we achieved or get this year are based on the €2.6 billion, but as the mathematics works, unfortunately, the €1.6 billion will be relevant to next year, and we have to compensate for that as well in our cash flow. And yes, in terms of the cash flow and net liquidity, this has something to do with how we treat the investment and in the Rivian JV and also the convertible that technically will convert basically in the third -- in the fourth quarter and then burden the cash flow, but the net liquidity is already earlier.

Yes, we'll see a release. So the improvement in fourth quarter in the net liquidity has to come from cash flow from financing and not out of the operating or...

Which basically -- but is a reclassification of the convertible into M&A, basically. And which -- and it's included in the M&A forecast already.

Thank you.

Okay. Thank you, Daniel. And we move on to Michael Punzet from DZ Bank. Please go ahead.

Michael Punzet, I have two questions. First one is on the order bank in Western Europe. Can you give us, please, a number for the overall order bank and also in addition, a number for the BEV order bank? And the second question is with regard to the ongoing negotiations in Germany. According to some press articles, the cancellation of the wage agreement will lead to wage increases up to 10%. Can you confirm that? And if so, when will this effect hit the P&L?

The order bank is 870,000. It's basically to give you basically a rough comparison: 800,000 was a typical order bank we had pre-COVID. So it's really an order bank that was typically for 2018-2019, so yes, it's down, but it's not significantly down compared to a more normal situation pre-COVID. And the order bank for BEVs is 170...

870 was the overall number.

8-7-0.

And the other question, the -- what you have read, Michael, in the press is that if we don't come to an agreement with the unions on the new tariff, then obviously, the old tariff from 1984 would come into force and that this might then lead to a technical increase of wages, et cetera, et cetera. Again, speculation, yes, it's rather difficult to say whether really the old regime would then come into play or not and ask for your understanding that we don't want to comment here on the speculation currently in the press.

Okay, thank you.

Thank you, Michael. So we continue our best for last, George, George Galliers from Goldman. Please go ahead.

Thank you, Rolf and thank you, Arno for taking my questions. The first one I wanted to focus on was personnel costs in light of the negotiations that are taking place. If I look at your reported personnel costs, as a percentage of revenue, they were just over 15% last year. If I look at the majority of your peers in Europe, the ratio is closer to 9% to 11%. As part of these negotiations and also as part of the 6.5% margin target for VW brand, are you looking to get down to parity with your peers or are you simply looking to close some of that very material gap. Second question I had was with respect to the range extended technology that you have unveiled with Scout? Is that a technology that you have developed at Volkswagen or is it something you will develop in conjunction with Rivian? And do you plan to also examine using range extended technology in both Europe and China going forward? Thank you.

Yes, thanks for your question there. Looking at the personnel costs, of course, we have a target for the personnel cost. We don't really calculate it specific like-for-like with our competitors because that has heavily to do something with the value-added debt. And as you are aware, we run also a lot of component businesses in Germany. For example, castle for gearboxes and electric engines for engines. So -- and also in Porsche, so I would expect that our value-add debt is higher than from the competitors. So even with a 100% competitive position, you should expect a slightly higher percentage of personnel cost because that would compare to other competitors, who had less value-added debt should be then material cost by them. So rather on comparing on that cost proportionally, we look on what needs to be done in order to be 100% competitive, both in terms of margin, but in terms of factory costs. And we have a clear factory cost target for all factors, obviously. But we specifically have to bring our factory costs down in our German operations, in our German factories, we have the personnel cost from the factory costs are over proportionately high. Of course, we have targets there. And not only in terms of cost per hour, but specifically also in terms of productivity, and with the implementation of the measures there to become competitive also in the German plus, the personnel cost as a percentage point should obviously significantly go down. Yes, your second topic on the range extender, the range extender was really developed by Scout together with Volkswagen. And as you're aware, the range extender's concept is a specific concept where you have a battery. And it's -- yes, it stays 100% electrical concept. You either have a big battery for the Scout or you have a smaller battery and in the package that you free, you implement the engine and the gas tank and so on. This concept is a concept that is specifically suitable for bigger cars with a bigger footprint. The concept is more difficult to integrate into smaller cars. So this is why we start with Scout. Of course, we look on the different options. But for the time being, the range extender concept is really a concept we want to bring firstly at Scout. And as I said before, it is in all electric Scout and the range extender, as you know, charges basically the battery.

Great. Very good. That concludes the Q&A session for today. Thank you very much for the very vivid discussion we had. Of course, if there is anything left unanswered, yes, please contact the team here in Vosburg, Lars, myself or any of the other IR member. Next time to meet us is at our virtual and physical road shows in London and the U.S. and in Paris. The fiscal year results will be released on March 11. And now we go for a short break before we return in about five, seven minutes, and then we'll continue with the media session. Again, thanks very much. Stay healthy and looking very much forward to catch up in person or virtually over the next couple of weeks. Thank you.